If you’re in the market for a home loan, remember to shop around, to compare costs and terms, and to negotiate for the best deal.
Here are some details to pay close attention to:
Ask each lender and broker for a list of current mortgage interest rates and whether the rates quoted are the lowest for that day or week. You may also find information on market rates in the newspaper or on the Internet.
Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-rate loans go up, generally the monthly payment goes up, too.
If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment will vary, including how high your payment can go and whether your loan payment will be reduced if rates go down. If you think you will have trouble making the loan payments in the future, don’t accept the loan.
Ask about the loan's annual percentage rate (APR). The APR includes not only the interest rate but also points, broker fees, and certain other credit charges that you may be required to pay, shown as a yearly rate.
Ask whether there is a prepayment penalty if you decide to refinance or pay off your loan early.
Points are fees paid to the lender or broker for the loan and are often linked to the interest rate. Usually the more points you pay, the lower the rate.
Check online or in the newspaper for current information about rates and points.
Ask for points to be quoted to you as a dollar amount rather than just as the number of points so that you will actually know how much you will have to pay.
A home loan often involves many fees, such as loan origination fee or commitment fee, broker fee and closing costs. Some fees are paid when you apply for a loan (such as application and appraisal fees), and others are paid at closing.
Ask every lender or broker for an estimate of fees. By federal law, you are entitled to receive a written “good faith estimate” of all the fees and closing costs shortly after you apply for a home loan.
Ask what each fee includes. Ask for an explanation of any fee you don’t understand.
Negotiate. Some of these fees may be negotiable.
Realize that borrowing the money to pay these fees will add to the principal amount of your loan.
Down Payments and Private Mortgage Insurance
Lenders may require 20 percent of the home's purchase price as a down payment. If you do not make a 20 percent down payment, the lender may require you to purchase private mortgage insurance
Don’t assume that minor credit problems or difficulties like illness or temporary loss of income, will limit your loan choices to only high-cost lenders.
If your credit report contains negative information that is accurate, but there are good reasons for trusting you to repay a loan, be sure to explain your situation to the lender or broker.
If your credit problems cannot be explained, you will probably have to pay more than borrowers who have good credit histories. But don't assume that the only way to get a loan is to pay a high price. Ask how your past credit history affects the price of your loan and what you could do to get a better rate.
Make sure your income and financial status are accurately reflected on the loan application. There could be serious consequences if your income is inflated to qualify you for the loan.
We Can Help
If you have a complaint about a mortgage, contact us toll free within North Carolina at 1-877-5-NO-SCAM.